Turn Your Spare Change Into Generational Wealth With This App

If you are looking for a way to invest your money with minimal effort and time commitment, Acorns may be a great app for you to consider.

What is Acorns?

Acorns is a stock investing app that allows its users to automatically invest their spare change in the stock market with no hassle. It is different from other investing apps like Robinhood because of its popular feature called ‘roundup.’

Essentially, this feature will invest your spare change by rounding up your credit card transactions to the nearest dollar.

For example, if you spent $125.46 on your credit card, then acorns will round up the transaction to $126 and invest the $0.54 for you automatically. This is a great feature for the average investor because it forces you to invest consistently without worrying about market direction.

Benefits of Acorns

For the everyday stock market investor, Acorns may be a great choice because of its hands-off approach.

Once you go ahead and set up your Acorns stock app, there is no need to ever check it again.

There is a saying in finance that time in the market beats timing the market and this is exactly what Acorns is helping to promote. Many people know they should invest, but setting up a good brokerage account and doing research about the stock market just does not sound fun to most people.

Acorns can take all the burden off of you by completely simplifying the investing world.

All you must do is set up an account and pick from just a few different investing plans. Once you pick the investment plan then you can simply deposit some money or turn on the roundup feature and you are done! The simplicity of Acorns is unmatched compared to any other stock app.

Downsides of Using Acorns

Unfortunately, investors must pay for the simplicity that Acorns provides.

The catch is that if you don’t have more than a few thousand dollars to invest then lots of your capital gains will be negated by the fees that Acorns charges. Acorns cheapest option is currently priced at $1/ month.

At first glance, this seems like a great deal as who can’t afford $1/month right? Well, it’s a bit more complicated than that. To put this into perspective, the stock market generally provides a return of 7–10% annually. With an initial balance of $1,000, this means that you will make about $70/year depending on how the market does.

If you are paying $12/year to use Acorns, you are essentially donating about a whopping 20% of your gains to them! In addition, there are even more fees that come with the investments Acorns puts your money into called expense ratios.

The main point to take away from this is that Acorns is NOT the most efficient way to invest your money.

Alternative stock apps like Robinhood do not charge any additional fees, but no matter which investing app you decide to go with, you will have to pay expense ratios for funds you buy. The only time you will not pay fees is if you are buying single stocks such as Apple or Microsoft.

However, for the average stock market investor, buying into funds that track the overall stock market is recommended because it is the most hands-off and sure-fire way to make money over the long run on the stock market.

Bottom Line

Acorns is an amazing concept and is not the worst way to invest in the stock market.

However, you must know that it is far from the most efficient way to do so. Acorns comes with additional fees that most stock apps do not charge.

Furthermore, many brokerages now have automatic deposit features that can still make your investing experience just as hands-off as Acorns when set up correctly.

For example, if you wanted to invest in the overall stock market with an app like Robinhood you could simply set up a recurring deposit with a broad market ETF (exchange-traded fund). You can do this for as little as $1 a week if you want to.

You will still pay the expense ratio for the fund managers but there will not be any other additional monthly charges to worry about!

Regardless of which route to take, just remember that starting your investing journey as soon as possible is the most important thing to do. The hardest part is starting, but once you do, you will understand why they say time in the market beats timing the market.